When starting a new business, a common problem among many entrepreneurs is where to find sources for funding. There are plenty of good business ideas that you can think of. However, these plans may never be realized because of a lack of, or unavailability of start up capital. In order for you to raise start up capital for your business, you first need to determine various avenues for funding. You then find the funding option that best suits your needs and you should be able to present yourself in a manner that will make you worthy of being accorded funding for your business. These important steps can spell a huge difference when starting your own business.
Before going for a certain funding option, it would be best to look around for other better possible options for sourcing your start up capital. Doing a thorough research on the market not only gives you more choices, it also helps you understand what it can do best for you. The Internet provides a plethora of information on how to raise start up capital for your business. If you plan to start a small business, there are a lot of helpful online resources that can clue you in on different kinds of available funding.
Reading newspapers is also an excellent way to receive the latest information on raising capital for your business. Moreover, you may want to ask advice from experienced entrepreneurs. Not only will they be able to give you useful information on starting a business and finding details on sources of start up capital, they can also help you in establishing connections as well.
The next thing to do is to know the different sources of capital. There are several kinds of funding options that can help you raise start up capital.
For one, there is equity financing, which is a form of funding that grants you money in exchange for a part of ownership in your business. Venture capitalists and informal investors usually offer equity financing. This type of funding can be a good way to raise start up capital because you can pay back your loan within a fixed time period. However, a downside of equity financing is that you may lose a part of, or full control of your very own business. Some lenders may want to gain a bigger chunk of your business’s earnings or full control of your business decisions. Thus, you limit leeway for running your business. Because of this downside, some experts suggest that you consider equity financing as your last resort especially for those who are starting a new business.
Another funding option for raising start up capital is debt financing. Simply put, debt financing is essentially a loan and is commonly offered by accredited government agencies and banks. Basically, you owe the bank or lending agency money when you use debt financing as a way to raise start up capital. Unlike equity financing, this type of funding option enables you to keep ownership rights to your new business. Interest on debt financing is tax deductible as well. Some potential businessmen, however, may veer away from debt financing because it often involves high interest on the loaned amount.